Final Results

John David Group (The) PLC 11 May 2005 11 May 2005 THE JOHN DAVID GROUP PLC PRELIMINARY RESULTS FOR THE 52 WEEKS ENDED 29 JANUARY 2005 The John David Group Plc (the 'Group'), a leading specialist retailer of fashionable branded sports and leisure wear, today announces its Preliminary Results for the 52 weeks ended 29 January 2005. 2005 2004 % Change £000 £000 Turnover 471,656 458,073 +3% Gross profit % 45.6% 45.6% Operating profit (before exceptionals, goodwill, and 17,891 10,498 +70% loss on disposal) Operating profit after interest (before exceptionals, 13,734 5,964 +130% goodwill and loss on disposal) Operating profit 8,356 7,734 +8% Profit before tax 2,630 2,105 +25% Basic earnings per ordinary share 2.85p 1.39p +105% Adjusted basic earnings per ordinary share 18.39p 6.21p +196% Total dividend per ordinary share 6.60p 6.50p +2% Net debt at end of period 30,767 51,066 -40% • Total sales increased by 3.0% in the year and 4.7% on a like for like basis. • Gross margin static at 45.6% held back by the aggressive elimination of aged and under performing stocks. • Overheads tightly controlled. • 41 under performing stores closed in the year but no significant reduction in retail space following the acquisition of RD Scott Limited Fashion fascias. • Group like for like sales for the 13 weeks to 30 April 2005 up 2.4%. Peter Cowgill, Executive Chairman, said: 'The Group made considerable progress in turning around its trading performance and reduced its net debt by £20.3 million to £30.8 million. The Board remains confident that continuing progress is being made in the restoration of more favourable operating ratios across the Group.' Enquiries: The John David Group Plc Tel: 0870 873 0333 Peter Cowgill, Executive Chairman Barry Bown, Chief Executive Brian Small, Finance Director Hogarth Partnership Limited Tel: 020 7357 9477 Andrew Jaques Barnaby Fry EXECUTIVE CHAIRMAN'S STATEMENT INTRODUCTION The 52 week period to 29 January 2005 was an encouraging one as the Group made considerable progress in turning round its trading performance, particularly in the Sports fascias, and reduced its stocks by £11.9 million and its net debt by £20.3 million to £30.8 million. This debt reduction was achieved after the purchase of RD Scott Limited ('Scotts') at a cost of £4.5 million in December 2004. GROUP PERFORMANCE Sales Total sales increased by 3.0% in the year to £471.7 million from £458.1 million and by 4.7% on a like for like basis. We continually aim to enhance our customer footfall and conversion by constantly changing our brand and product portfolio to maintain the best differentiated footwear and apparel offer in our sector. We have also embarked on a stock clearance programme to reduce older and under performing stocks in the business. This has allowed our stores to carry fresher stock and a greater proportion of newer ranges. This attracts more consumers to shop in our stores and increases sales densities. We have also continued to work more closely with our branded suppliers to ensure we have a wide range of exclusive and more narrowly distributed product creating real differentiation from our competitors. Our offer is complemented by McKenzie and Carbrini own brand product, which accounted for 8% of sales (2004: 6%). In addition, we continue to be innovative with instore windows and merchandising and align our fascias and brands with the sports and music icons of our core customer group. Gross margin and stocks Gross margin for the year was static at 45.6% but this figure was held back by the much more aggressive elimination of aged and under performing stocks, particularly Fashion stocks. We believe this will lead to some margin enhancement in the current year even in the face of a very competitive environment. Year end Group stocks were £53.9 million (including £1.9 million of Scotts stocks), a reduction of £11.9 million since January 2004. Debt reduction and gearing Net debt was reduced from £51.1 million to £30.8 million in the year bringing gearing down to 55% (2004: 89%). Overheads Overheads were well contained and controlled with a small reduction in normal selling, distribution and administration costs in the year. This was achieved by reducing the number of under performing inefficient stores in our portfolio, by continuing to tighten control of retail wages, and by the reduction of other central costs. Operating profit and results Operating profit before exceptionals, goodwill amortisation and loss on disposal rose from £10.5 million to £17.9 million. Our objective is to continually drive the net margin ratio upward. Operating profit in the year rose from £7.7 million to £8.4 million after exceptional items of £8.7 million (2004: £2.0 million) and goodwill amortisation of £0.8 million (2004: £0.8 million). The exceptional items comprised a £6.7 million impairment charge on under performing stores closed in the year or stores earmarked for disposal, a £1.3 million charge for expected onerous lease rental costs on five stores, and £0.7 million, principally for the termination costs of the previous Chairman and a number of senior staff in buying, merchandising, marketing and human resources. The impairment provision has been substantially increased since our half year results were announced as we have continued to add to our store disposal list in a determined effort to ensure we have a more productive portfolio for the future. After closing 41 stores in the year, there remained 52 stores in our portfolio which were fully impaired. We are aiming to close approximately 20 in the current year, and we have already closed five. After charging a loss on disposal of fixed assets of £1.6 million (2004: £1.1 million) arising largely out of store closures, the profit on ordinary activities before interest was £6.8 million (2004: £6.6 million). Net interest charges in the year fell from £4.5 million to £4.2 million. The impact of debt reduction was offset by increases in base rates and by a 0.3% increase in the margin early last year which has been reversed early in the new year. Profit on ordinary activities before taxation was £2.6 million (2004: £2.1 million) and after taxation was £1.3 million (2004: £0.6 million). Sports fascias It is pleasing to report that in spite of the increasingly competitive retail sports environment, we have made considerable progress both in the trading performance of the Sports fascias and in laying the foundations for further performance improvement by the elimination of under performing stores and stocks. In addition to this we have continued to enhance our position as the leading fashion oriented retailer of sportswear by the development of sales from newly introduced brands and our own brand product. The two biggest challenges for the Sports fascias are the increasingly wide distribution of sportswear by value retailers and the optimisation of the store portfolio. Fashion fascias The ATH-, AV and Open Fashion fascias under performed throughout the year saddled with a very poor stock situation, comprising ill advised buys for Spring /Summer 2004 both in quality and quantity terms, an excess of brought forward aged stock, the absence of certain key brands and inadequate brand consistency. The latter stemmed from the previous inability of these fascias to present a consistent message and appropriate brand adjacencies. This was weakening the business and led to these fascias, which accounted for approximately 8% of Group sales in the year, making no contribution to central overheads. It was for these reasons that the opportunity to purchase Scotts was taken in December 2004. Scotts was a small privately owned branded fashion chain operating in the same market but which had better access to aspirational brands such as Henri Lloyd, Ted Baker and Hackett. The acquisition has given the Fashion business improved access to key brands and a stronger more focused management team. The two businesses will be run autonomously with accountability being greatly increased as a result. The intention is to retain only the Scotts and Open fascias and the brands have responded very positively to both the acquisition and our strategy. Store portfolio There has been considerable progress in closing under performing stores in the last year and there has been no net cash cost to those disposals. 41 stores were closed and, following the exceptional impairment charge as a result of our store portfolio review, the Group still retained 52 fully impaired stores which we either have to close and dispose of or improve efficiencies considerably. It has to be recognised that certain stores may become increasingly difficult to dispose of and consequently there will be a cost to this process. Continuing rises in rent, rates and minimum wages at levels above inflation, combined with continual change and development in the shopping centres within many regional centres mean that the programme for elimination of under performing stores is ongoing. It is not expected that there will be exceptional costs on the scale of those reported for the last year because of write downs already made. Nevertheless some net cash cost is likely to be incurred on the closure of approximately 20 more stores in the current year. New store opportunities are not being overlooked and we opened 13 new stores in the last year in addition to the acquisition of 23 Scotts stores. Square footage of retail space at 29 January 2005 was 1,206,000 (2004:1,236,000). We expect to open less than 10 new stores in the current year with the store appraisal process recognising the demanding competitive environment. DIVIDEND AND EARNINGS PER ORDINARY SHARE The Board indicated during the last year that it would change its dividend policy to ensure that the dividend declaration was more proportionate to the results of each half year. The Board proposes paying a final dividend of 4.4p per ordinary share bringing the total dividend paid for the year to 6.6p per ordinary share (2004: 6.5p). The proposed final dividend will be paid on 1 August 2005 to all shareholders on the register on 20 May 2005. The adjusted earnings per ordinary share before exceptional items and amortisation of goodwill was 18.39p (2004: 6.21p). The basic earnings per ordinary share was 2.85p (2004: 1.39p). CURRENT TRADING AND OUTLOOK Trading has continued to be satisfactory since the year end. Sales for the thirteen week period ended 30 April 2005 have been up 2.4% on a like for like basis against prior year with Sport fascias up 2.7% and Fashion fascias up 0.3%. The Fashion figures are not likely to be more positive until recent gains in brand distribution are added to our Autumn offer. The Board remains confident that continuing progress is being made in the restoration of more favourable operating ratios throughout the Group. EMPLOYEES The Group has come through a difficult period as a result of the skills and efforts of its managers and the dedication of all its employees. The whole Board thanks them all for their loyalty, support and commitment. We must maintain that commitment to ensure the business now delivers on its renewed promise. Peter Cowgill Executive Chairman 11 May 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the 52 weeks ended 29 January 2005 Note 52 weeks to 12 months to 29 January 31 January 2005 2004 Continuing Continuing Continuing operations Acquisitions operations operations £000 £000 £000 £000 Turnover 468,790 2,866 471,656 458,073 Cost of sales (254,997) (1,507) (256,504) (249,379) ________ _______ _______ _______ Gross profit 213,793 1,359 215,152 208,694 Distribution costs - normal (184,463) (974) (185,437) (186,117) Distribution costs - exceptional (7,987) - (7,987) (1,366) Administrative expenses - normal (13,518) (71) (13,589) (13,503) Administrative expenses - exceptional (736) - (736) (612) Other operating income 953 - 953 638 ________ _______ _______ _______ Operating profit 8,042 314 8,356 7,734 _________________________________________________________________________________ Before exceptional items and goodwill amortisation 17,577 314 17,891 10,498 Exceptional items 1 (8,723) - (8,723) (1,978) Goodwill amortisation 1 (812) - (812) (786) _________________________________________________________________________________ Operating profit 8,042 314 8,356 7,734 Loss on disposal of fixed assets (1,569) (1,095) _______ _______ Profit on ordinary activities before interest 6,787 6,639 Other interest receivable and similar income 304 100 Interest payable and similar charges (4,461) (4,634) _______ _______ Profit on ordinary activities before taxation 2,630 2,105 Taxation on profit on ordinary activities (1,293) (1,457) _______ _______ Profit on ordinary activities after taxation 1,337 648 Dividends paid and proposed (3,119) (3,038) _______ _______ Retained loss (1,782) (2,390) _______ _______ Earnings per ordinary share: 2 - Basic 2.85p 1.39p - Adjusted to exclude exceptional items and goodwill amortisation 18.39p 6.21p - Diluted 2.85p 1.39p The Group has no recognised gains or losses other than the results reported above. The results above also represent the historic cost profit. CONSOLIDATED BALANCE SHEET As at 29 January 2005 29 January 2005 31 January 2004 £000 £000 Fixed assets Intangible assets 18,318 14,976 Tangible assets 56,789 68,183 _______ _______ 75,107 83,159 _______ _______ Current assets Stocks 53,857 65,727 Debtors and prepayments 11,707 14,452 Cash at bank and in hand 6,531 4,934 _______ _______ 72,095 85,113 Creditors: amounts falling due within one year (58,957) (55,667) _______ _______ Net current assets 13,138 29,446 _______ _______ Total assets less current liabilities 88,245 112,605 Creditors: amounts falling due after more than one year (28,653) (51,555) Provisions for liabilities and charges (3,929) (3,756) _______ _______ Net assets 55,663 57,294 _______ _______ Capital and reserves Called up share capital 2,364 2,338 Share premium account 9,042 8,917 Profit and loss account 44,257 46,039 _______ _______ Equity shareholders' funds 55,663 57,294 _______ _______ RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS As at 29 January 2005 29 January 31 January 2005 2004 £000 £000 Profit for the period 1,337 648 Dividends paid and proposed (3,119) (3,038) _______ _______ Retained loss for the period (1,782) (2,390) Proceeds from issue of ordinary shares 146 - Scrip dividend adjustment re 2004 5 920 _______ _______ Net movement in equity shareholders' funds (1,631) (1,470) Opening equity shareholders' funds 57,294 58,764 _______ _______ Closing equity shareholders' funds 55,663 57,294 _______ _______ CONSOLIDATED CASH FLOW STATEMENT for the 52 weeks ended 29 January 2005 52 weeks to 29 12 months to 31 January 2005 January 2004 £000 £000 Net cash inflow from operating activities 37,219 23,600 Returns on investments and servicing of finance Interest received 304 100 Interest paid (4,442) (4,402) Interest element of finance lease and hire purchase contract (19) - _______ _______ (4,157) (4,302) _______ _______ Taxation 244 (1,287) _______ _______ Capital expenditure Purchase of tangible fixed assets (8,056) (11,493) Proceeds from disposal of fixed assets 2,910 2,264 _______ _______ (5,146) (9,229) _______ _______ Acquisitions Cash consideration (4,183) - Net overdrawn balances acquired (420) - _______ _______ (4,603) - _______ _______ Equity dividends paid (1,816) (4,375) _______ _______ Net cash inflow before financing 21,741 4,407 _______ _______ Financing Receipts from new loans 5,000 - Loan repayments (26,500) (3,000) Proceeds from issue of equity shares 146 - Capital element of finance lease and hire purchase repayments (170) - _______ _______ (21,524) (3,000) _______ _______ Increase in cash in the period 217 1,407 _______ _______ RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES for the 52 weeks ended 29 January 2005 52 weeks to 12 months to 29 January 2005 31 January 2004 £000 £000 Operating profit 8,356 7,734 Depreciation charge 17,812 10,060 Amortisation of goodwill 812 786 Decrease in stocks 14,674 1,990 Decrease in debtors 2,360 80 (Decrease)/increase in creditors (7,082) 2,950 Issue of redeemable loan notes 287 - ______ _______ Net cash inflow from operating activities 37,219 23,600 ______ _______ RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT for the 52 weeks ended 29 January 2005 52 weeks to 12 months to 29 January 2005 31 January 2004 £000 £000 Increase in cash in the period 217 1,407 Cash outflow from decrease in debt 21,670 3,000 Issue of redeemable loan notes (287) - Overdraft and finance leases acquired with subsidiary undertaking (1,301) - _______ _______ Reduction in net debt in the period 20,299 4,407 Net debt at start of period (51,066) (55,473) _______ _______ Net debt at end of period (30,767) (51,066) _______ _______ ANALYSIS OF NET DEBT As at 29 January 2005 31 January Cashflow £000 Acquisition Other 29 January 2004 £000 £000 2005 £000 £000 Cash at bank and 4,934 217 (420) 1,800 6,531 in hand Overdraft - - - (1,800) (1,800) ______ ______ ______ ______ ______ 4,934 217 (420) - 4,731 Debt due after one (48,000) 18,500 - 4,000 (25,500) year Debt due within (8,000) 3,000 - (4,000) (9,000) one year Redeemable loan - - - (287) (287) notes Obligations under finance lease and hire - 170 (881) - (711) purchase contracts ______ ______ ______ ______ ______ Total (51,066) 21,887 (1,301) (287) (30,767) ______ ______ ______ ______ ______ NOTES TO THE FINANCIAL STATEMENTS 1 Operating profit and exceptional items Operating profit is stated after charging goodwill amortisation of £812,000. Exceptional items comprise of expenditure relating to the impairment of loss making stores, provisions for rentals on onerous property leases, redundancy costs and bank reorganisation costs. £000 Impairment of tangible fixed assets on loss making stores 6,701 Provision for rentals on onerous property leases 1,286 Redundancy costs 440 Bank reorganisation costs 296 _____ 8,723 _____ 2 Earnings per ordinary share Basic earnings per ordinary share represents the profit for the period of £1,337,000 (2004: £648,000) divided by the weighted average number of ordinary shares in issue of 46,978,013 (2004: 46,748,607). Adjusted basic earnings per ordinary share have been based on the profit on ordinary activities after taxation for each financial period but excluding exceptional items and goodwill amortisation. The diluted earnings per share is based on 46,981,420 (2004: 46,750,776) ordinary shares, the difference to the basic calculation representing the additional shares that would be issued on the conversion of all the dilutive potential ordinary shares. There is no material difference to earnings if all the dilutive potential ordinary shares are converted. The earnings used to calculate earnings per ordinary share is given below: Earnings attributable to ordinary shareholders 52 weeks to Year ended 29 January 31 January 2005 2004 £000 £000 Profit on ordinary activities after taxation 1,337 648 - Exceptional items 8,723 1,978 - Tax relating to exceptional items (2,235) (509) - Goodwill amortisation 812 786 _______ _______ Profit after taxation excluding exceptional items and goodwill amortisation 8,637 2,903 _______ _______ Adjusted basic earnings per ordinary share 18.39p 6.21p _______ _______ 3 Accounts These figures are abridged versions of the Group's full accounts for the 52 weeks ended 29 January 2005 and do not constitute the Group's statutory accounts within the meaning of Section 240 of the Companies Act 1985. The Group's auditors have audited the statutory accounts for the Group and have issued an unqualified audit opinion thereon within the meaning of Section 235 of the Companies Act 1985 and have not made any statement under Section 237 (2) or (3) of the Companies Act 1985 for the 52 weeks ended 29 January 2005. Statutory accounts for the 12 month period ended 31 January 2004 have been delivered to the Registrar of Companies. Statutory accounts for the 52 weeks ended 29 January 2005 will be delivered to the Registrar of Companies following the Annual General Meeting. Copies of the full accounts will be sent to shareholders in due course. Additional copies will be available from The John David Group Plc, Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR. This information is provided by RNS The company news service from the London Stock Exchange

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